Whether you have a personal vehicle that’s moonlighting as a company car or an expansive commercial fleet, binding adequate auto insurance is essential. Not only is this coverage legally required, but it’s also necessary for protecting your financial health and your business reputation. Read on to discover the fundamentals of car insurance for business owners as well as a few tips for finding and securing adequate protection.
Understanding When Your Personal Auto Insurance Policy Will And Will Not Work
Assuming that your personal auto insurance policy will provide adequate protection is incredibly risky. This remains true even if your auto isn’t regularly used for company business. Your personal car insurance might cover some business use of your personal vehicle. In like fashion, the personal insurance that your employees carry might similarly cover some business use in their own vehicles.
However, there are often strict and clearly defined limits for this coverage. When purchasing or modifying a personal auto insurance plan, you must state your intentions to occasionally use your vehicle for work, and your insurer will then tailor your coverage to suit these intentions.
There are many auto insurance policies that specifically exclude damages resulting from business use. Moreover, when the risk of covering any portion of a personal vehicle’s business use becomes too high, car insurance companies maintain the right to cancel personal policies or to simply refuse coverage from the outset. Whenever vehicles are owned by a business or when they are used primarily for business purposes, commercial auto insurance is the best bet.
Understanding The Protections Provided By A Commercial Auto Insurance Plan
The Insurance Services Office (ISO) designed a standard form for providing commercial car insurance. This is known as the Business Auto Coverage Form (BACF). Comprised of five core sections, this form clarifies the terms and conditions of each policy to limit the risk of litigation. Understanding the terms defined in the BACF is a key part of making sure that your coverage needs are met. The BACF details:
- The types of autos covered
- The types of damage covered
- The causes of damage or types of risks covered
- The obligations of both parties (the insurer and the insured)
When a BACF fails to meet the unique needs of a policyholder, special endorsements can be added to broaden the available coverage and address additional risks.
In general, car insurance for businesses covers liability damages including physical damage or total loss of company vehicles and medical expenses incurred by those driving or riding in company cars. It can additionally cover damages sustained by those riding in or driving company autos that are caused by under-insured or uninsured parties.
For all insured vehicles, a comprehensive car insurance plan will cover both comprehensive loss and collision loss. Collision loss includes all damages resulting from crashes, and comprehensive loss covers damages that aren’t accident-related such as those caused by:
- Theft
- Vandalism
- Weather
Thus, if you’re wondering, “How does car insurance cover non-accident repairs?“, you’ll find the answer in the section of your policy’s BACF concerning comprehensive loss coverage.
If you or an employee who’s operating on of your commercial vehicles causes injuries to others, your policy’s bodily injury coverage will pay for the necessary medical expenses. This same policy will also cover all property damage caused by you or another at-fault driver in your company car according to the defined limits of its property damage coverage.
Specific Business Car Insurance Types
Just as with personal auto insurance, not all commercial car insurance plans are created equally. There are seven primary protections or coverage types that you have access to. Along with collision coverage and comprehensive loss, these include:
- Personal Injury Protection (PIP): Covers loss of income and medical expenses resulting from any injury irrespective of fault
- Rental Reimbursement: Covers the cost of an auto rental in the event of several auto damage or loss
- Medical Payments Coverage: Covers the medical and burial expenses of drivers or passengers injured in your vehicle irrespective of fault
- Coverage for Uninsured and Under-Insured Motorists: Covers damages caused by at-fault drivers who lack adequate insurance
- Liability Coverage: Covers damage to all persons or property for which you are at-fault
If you lease or rent your company vehicle, certain insurance companies and policies will provide you with full access to all of these coverage types. It’s important to note that not all commercial car insurance policies cover theft. However, comprehensive coverage will.
Determining Your Ideal Coverage Limits
To ensure that you’re meeting the legal insurance requirements for your geographic area, you should start building out your policy with liability insurance. $500,000 is the recommended minimum limit for liability coverage. However, binding a policy that provides up to $1 million in liability protection is advisable. In most instances, this increase in liability limits won’t have a significant impact on a plan’s premiums.
Small businesses should consider getting between $100,000 and $300,000 in uninsured/underinsured motorists liability. Commercial car insurance policies should additionally include $1,000 in collision and comprehensive deductibles as well as a minimum of $5,000 in medical coverage.
Understanding The Symbols In Your Business Auto Coverage Form
Before signing your policy documents and entering into a binding agreement, you should review the related BACF to make sure that the necessary protections are listed. Protections provided by a plan are listed in its BACF in the form of symbols. These symbols include the number 19 along with the numbers one through nine. These symbols indicate which autos are covered for each declaration.
The number one offers the broadest possible range of protection as it indicates coverage for any autos that you own, lease, or rent, as well as for vehicles owned by your employees or other parties. However, the number one only triggers liability coverage.
Both liability and physical damage are triggered by symbols two through four. Like one, three initiates coverage for all of the vehicles you own. Four applies solely to vehicles used strictly for commercial purposes, and three refers exclusively to private passenger autos.
If no-fault coverage is legally required in your area, check your BACF for symbols or numbers five and six. Five indicates no-fault coverage and six indicates uninsured/under-insured motorist protection.
Symbols seven, eight, and nine refer to trailers, hired vehicles, and non-owned autos respectively. Finally, symbol 19 is used to designate mobile equipment, specifically that which is required by law for your industry. This symbol might be present on your policy’s BACF if you own a forklift or farm equipment, and intend to operate it for limited distances on public roads.
Although binding car insurance for your business vehicles is essential, getting the right coverage type and the right coverage limits is equally important. With the information above, you can make sure that all of the necessary boxes are ticked.
